When your local big box store advertises wages beginning at $15/hour and the neighborhood Chick-Fil-A offers $14/hour for full time staff, soon businesses ranging from manufacturing to home healthcare find themselves competing for the same personnel. Even businesses with average compensation levels greater than these retail and hospitality examples are facing questions of how much is enough.
Before you consider raising salaries, it’s important to take a hard look at your business and determine a few things.
- Is this “sudden” rate inflation transitory or do you expect that these high rates will be around for the long haul?
If today’s new hires earn a higher rate than your current staff or what you’ll need to pay to attract talent next year, that is going to present several problems. Consider a hiring bonus as an alternative to making a commitment to a compensation rate that isn’t sustainable.
- Have you experienced a recent and sustainable bump in profits and are you ready to share that wealth?
Perhaps yours is one of the business to experience growth in revenues and profitability during the pandemic that is expected to become permanent. If you want to share the wealth, consider reinvesting some of those profits in more and/or better talent. If you’re not ready to make a permanent commitment to higher payroll, consider bonuses as opposed to increases. Another alternative is to increase benefits. A dollar of benefits goes a lot further for employees than a dollar of pay (because of taxes).
- When you consider overall company profitability, can you afford to pay more for talent?
If you are having trouble finding new people and discovering the labor market for your industry is tight, it may be time to reflect not only on what you’re offering for new hires but also what the potential cost would be of losing an employee. If a valued team member does leave, what is the cost of replacement in terms of training and onboarding time? Take that into consideration when establishing compensation levels for new hires and reviewing salaries of valued team members.